News is coming out that confirms what many have suspected for some time now, namely that Chinese producers of solar panels may have an unfair advantage over competitors. Given the centralized decision making in Beijing, government support of various technologies may present challenges for companies without the support of a strong central government.
The New York Times reports that last week seven U.S. based manufacturers of solar panels filed a joint suit with the Commerce Department against China, “accusing it of using billions of dollars in government subsidies to help gain sales in the American market.” The lawsuit also charges “China of dumping solar panels in the United States for less than it costs to manufacture and ship them.” The article goes on to say that the “equivalent of billions of dollars in subsidies in the form of deeply discounted loans, land, electricity, water and raw materials, as well as cash grants and tax breaks” were granted by the Chinese government.
According to the article, Oregon-based SolarWorld Industries America, which is the largest producer of conventional solar panels in the U.S., serves as the lead plaintiff on the case. China is by far the world’s number one producer, and exporter, of the panels. SolarWorld’s blog states this is the “first such case in the renewable-energy field.” The post goes on to say “the case involves a tangled mesh of subsidies that have enable China to undercut normal pricing, seize market share and wipe out competitors and their jobs.”
I wanted to clear up – briefly – three incorrect assumptions that I heard reporters and others bring to their coverage this week:
- We’re complaining about cheap Chinese production. No. We believe Chinese production costs approximate our own. Labor makes up a comparatively small part of overall costs. The Chinese must ship halfway around the world. At least in the recent past, China has imported silicon feedstock and manufacturing equipment from the West. Our labor productivity is higher.
- Chinese subsidies are no different from U.S. subsidies. No. Ours are fractional, narrow and transparent; theirs are all-encompassing, bottomless and typically hidden – in violation of WTO requirements. Further, the three remaining U.S. producers of solar cells – SolarWorld, Suniva and Solar Power Industries – have received no federal subsidies.
- If low product pricing is good for solar, Chinese tactics must be good for solar. No. If China seals a world monopoly, it will gain power and motivation to set prices higher. No reasonable observer should imagine that if China were allowed to continue piling billions of dollars into subsidizing artificially low prices to secure a monopoly that it would leave prices artificially low after succeeding. Also lost would be our renewable-energy security and jobs as well as the industry suppliers and their employees who would no longer need to operate in the West.